money stuff

[mamajoan]

I haven't posted anything about finances in a while, mainly because, who here really gives a crap? But suffice it to say, things haven't been looking great. I am pretty darn worried about money. I really needed some good financial news, and I seem to have gotten it today.

A few days ago I got something in the mail from the city tax department. I didn't really look at it, because I just assumed it was the water/sewer bill, so I didn't want to face it. ;) But this morning I thought, well, I should at least see what the damage is so I can tell Brian what his half is. So I opened it, and lo, it wasn't the water bill at all. It was my real-estate tax bill.

But no, this is a GOOD thing, because a couple months ago I applied for and got a residential exemption. Which, as it turns out, was whopping! The total amount that I paid (i.e., my mortgage company paid on my behalf) for the fiscal year 2005 was $1225 (note: all amounts in this post are rounded), and the actual amount that the city decided I owe, after the exemption, is $375. Resulting in a credit on the tax account of $850. So the "bill" that I was looking at actually shows a credit of $425 (because it's the bill for the third quarter; the fourth quarter would show the same credit, adding up to the $850). Woohoo!

(This morning I tried to call the city tax dept. to confirm that I was reading the bill correctly. The main number for City Hall rang and rang and rang. Well, that boded ill. So I called the mortgage company and wrangled with them for a while (see below) and then called the city again, this time got through, but the tax assessor's office gave me voicemail. So I left a message.)

I naturally assumed that my mortgage company would be recalculating my payment amount, and hopefully this would mean that my mortgage payments would decrease significantly. The fairly snarky woman (FSW) on the phone this morning said that they don't recalculate payments but once a year, which, in retrospect, I wish I had pushed her more on that, because I know for a fact that my payment amount changed like four times last year. Mainly due to the whole escrow issue, which if you read about it here at the time you might remember it, and if you didn't or don't, trust me, you don't care. ;)

Anyway, FSW insisted that the mortgage company had not received anything from the city which indicates that there's a credit on my tax account. So I called the city tax office again, this time got through, and they said that FSW is full of shit. The city tax lady (CTL1) said that at the end of fiscal '05 (namely, July 31st of '06), they would issue a refund check to me for the $850. She seemed to think that I was going to insist on getting a refund now, so she launched into her list of reasons why she didn't want to do that, and I assured her that it was fine with me, I didn't need a refund, I just wanted to confirm that I was reading the bill correctly. So she said yes, I was, and then she bitched a little about mortgage companies and the underpaid undereducated clerks who would look at the bill and not realize what the minus sign means (a minus sign on a bill means a credit) and would turn around and pay the amount. She urged me to talk to my mortgage company and make sure they understand that the amount on the bill is a credit, not a charge, so they shouldn't pay it. I assured her that I would do so.

Then I typed up a message summarizing the above, put it onto a fax cover sheet, and faxed it along with the tax bill to the mortgage company. I put both my work and home numbers on it, and I betcha anything they won't call back. I'm calling them again tomorrow if I haven't heard anything.

Then, just as I was typing this all up for y'all's edification (I know you feel oh so edified), City Tax Lady #2 (CTL2) called me, returning my voicemail, apparently unaware that I had called back after leaving that voicemail and talked to CTL1. So CTL2 said that I should write a letter to the tax office formally requesting that they issue a refund. I asked her, if I didn't do that, would the credit on my account be applied to next year's tax bill? She said she wasn't sure, but I shouldn't do that anyway because they didn't want the money sitting in their accounts and anyway it wasn't earning me any interest like it would if I got it from them. So I told her I was confused because CTL1 had seemed to imply that if I do nothing, the refund check would be issued to me automatically at the end of the fiscal year. CTL2 insisted that although this may or may not be true, it would still be better for me to request and receive the refund now, rather than wait. She claimed to have just discussed this with her boss, the actual City Treasurer, and said that what she was advising me was what he had told her to advise everyone.

So, hey, I'm not arguing. If the city wants to give me $850, am I going to put up a fuss? I am not. I'll write them a letter requesting the refund of that money. But it seems to me, if I understand this shit correctly, that if I pocket the $850, then the mortgage company won't change my mortgage payment amount, because they won't have felt the effects. I mean, from their perspective, they already paid $1225 on my behalf and I need to repay them that via my monthly payments ... right? Unless it's retroactive. I'm not sure whether the escrow portion of my monthly mortgage payment is for future taxes or past taxes. Even if it's for future, they should still recalculate, I think, because next year's tax bill won't be another $1225; it might be more than $375, but not that much more. But I'm not really sure how it all works.

So I'm not getting too excited yet about the idea of an unexpected $850 headed my way, because on the whole I think I'd rather have a significantly lower monthly mortgage bill than a lump sum. Maybe. But I'm still confused about the whole thing, so I'm going to hold off on the woohooing until I get some answers from the mortgage company. I'm feeling optimistic about it nevertheless, because it does seem to me, unless I vastly misunderstand this whole thing, that either way things are going to look up. I mean, either a reduced mortgage payment OR a lump sum of $850 would be very nice to have right now. Of course, both would be best ;) but a girl has to take what she can get.

Comments

[ajmcoqui.livejournal.com]

FWIW, I went through this last year when I lived in Boston (JP) - I applied for and was granted residential exemption. What happened to me, though was this - the tax office automatically adjusted my bills, and the mortgage company was smart enough to pay only what they were billed by the state (instead of their own "estimated tax" figure), and so I built up a credit in my escrow, rather than with the MA tax office. I called the mortgage company, explained that the taxes had changed, they called the tax office directly to confirm, and then they both changed my escrow amount and issued me a check for the extra cash (because they don't want it in there any more than the tax office does). Yay, all was well! So the moral of the story is this - keep bugging your mortgage company, and they will fix it. If you get a tax refund, it goes to you, not the mortgage company - the mortgage guys are supposed to call the tax office directly to get the new tax rates and adjust your escrow, and even though they say they only do it once a year, I'd press them to do it now since you've had a "qualifying event" in the form of a specific change to your tax rate.

Good luck!

[mamajoan.livejournal.com]

Yeah -- I understand all that. I guess the issue is just, do my escrow payments go toward tax payments that the mortgage company has already paid on my behalf, or toward future tax payments they expect to make? If they go toward what has already been paid, then I can see the mortgage company saying, "well you still have to pay us this amount because it's what we paid on your behalf." So the refund from the city would go to them. Whereas, if my escrow payments are toward future taxes, then the mortgage company should definitely be adjusting them downward based on the fact that my actual taxes are way lower than we thought they would be.

Anyway, it's hella confusing and you can BET that I'll be hounding them until I get an answer. If I learned anything from the whole mess last year, it's that you can't just sit around and wait for the mortgage company to fix things, because what do they care? They just want your money. So I'll definitely be on their case.

[ajmcoqui.livejournal.com]

My understanding (at least, with my mortgage company) is that the escrow funds are collected in anticipation of the tax bill - they are collected *before* the tax bill is issued, and used to pay said bill when it comes due. If your bill comes quarterly, the mortgage company will get the tax rate from the state, estimate what your quarterly liability is, divide it by three, and set your monthly escrow based on what they think your taxes will be. Then, when the bill comes to them, there's money to pay it based on what you've paid them for the past three months. They should only pay the bill amount, and any leftover money stays in escrow to go towards the next bill. They usually like to keep this "extra" low so they don't have to pay you interest on the account.

If you have already paid too much in taxes, the refund is YOURS, since you put money into escrow, the escrow paid the bill, and the mortgage company was just acting as a holding company in between. If the mortgage company refuses to adjust your escrow except once a year, and you keep paying too much into escrow, when they *do* end up adjusting it to the current tax rate, whatever extra you have in escrow they will refund to you directly after the adjustment. It's a pain in terms of cash flow, but at least you know you'll eventually get it back.

Good for you for hounding them about it. I only found all this out by bugging my mortgage people all the time. They were actually quite good about it and adjusted the escrow amount immediately, but in your case, even if they don't, they can't legally refuse to adjust it eventually.

[sydb42.livejournal.com]

I'm not sure if it's state law (in which case it wouldn't apply to you) or federal, but the laws changed such that the escrow account has to have a zero balance at least once a year (I think that's what it's called) and the payment recalculated based on what your estimated taxes are for the next year and any extra they had to pay, if any. With my mortgage, once a year we get a statement from the mortgage company telling us how much they paid and how much was in the escrow account. If there was more money than what they had to pay, we got a check (this has happened exactly once). If they had to pay more than what was in the account, we had the option of paying the difference right away, or spreading the difference out over the next year's mortgage payments.

Anyway, all this is to say that, at least in my case, the escrow money being taken out of your mortgage payment is to pay future bills, not bills already paid, unless they had to pay more than what was in the account. When you closed on your house, there was probably a lump sum paid toward the year's taxes right away, and then the escrow account is set up to hold money for next year's taxes.

FWIW, the law I mention above was changed because mortgage companies ended up holding HUGE surpluses of money in the escrow account, earning interest themselves instead of the person paying it earning it.

[orbitalmechanic.livejournal.com]

Our mortgage company likes to have the money in advance--that's what escrow is, normally, a fund out of which bills are paid. Sometimes they get the numbers wrong and your escrow goes negative, meaning they've paid in advance and your next mortgage payment is paying them "back". But that's not how they like to do it.

So the way I understand it is: your mortgage company overpaid your taxes last year, and your monthly payments in 2005 covered the cost of those payments. Now someone is getting a refund from the city. Either it's you, or it's your mortgage company, in which case they should either apply it to your escrow or pass it on to you. That should all be in the past. For the future, if your annual tax payment is $850 less, your monthly mortgage payment should go down by, what, $70? I think so.

Now, your mortgage company is crazy, so who knows what they've done, but you should call them and make them recalculate. Probably more than once, based on your past reports.

[bearblue.livejournal.com]

*good thoughts!*